tv
Joseph Stiglitz People Power and Profits CSPAN August 16, 2019 4:15am-5:19am EDT

4:15 am

>> hello. good evening welcome to barnes & noble for go thank you for coming out tonight we have joseph with us tonight who is an economist of public policy analyst and the recipient of the 2001 nobel prize in economics and a former senior vice president and chief economist at the world bank german at the council of economic advisers also the author of several books many of which are on this table

4:16 am

including people and power and profits. he challenges us to frame the economy that it may not be too late to re-create shared prosperity and a middle-class life attainable by all. joined in conversation with chief financial correspondent and also hosted since 2014 please join me to welcome them to the stage. [applause] >> hello. this is extremely exciting.

4:17 am

to the hometown barnes & noble. this will be a friendly local audience i am sure. we are already in the heart of the 2020 election campaign. i read this book. well done. [laughter] but what i can tell you is this book is basically a manifesto. so if you want to know what that means i will ask what does progressive capitalism

4:18 am

that is a euphemism for socialism. >> i don't know where to begin answering the question but there has been an attempt by trump to focus the debate between aoc and bernie sanders as a democratic socialist to say that the same as maduro in venezuela and all those things we had in the past. but the fact is socialism in the past was the ownership of government to old coal mines and steel mills nobody is talking about that. >> not even aoc or bernie. nobody is talking about that.

4:19 am

what they are talking about is to reshape the market economy to serve ordinary citizens. so the market economy has not been working gdp going up the bottom 90 percent not the bottom 5 percent but 90 percent has almost stagnant income for more than three decades. just a couple of numbers that real wages adjusted for inflation at the bottom are the same today as they were 60 years ago. can you imagine? they say 60 years ago it was $150 now it is 5000.

4:20 am

now you have left the income at the bottom level for 60 years. it was the same but let me go on. so the income of a full-time worker is the same more than 40 years ago. dad is part of the discontent for three years in a row so these symptoms that gdp is going up the large populations are not working but with progressive capitalism let's use the energy of the market and it does have certain virtues to temper that and

4:21 am

direct that to the well-being of our society. and there was an article i wrote in the new york times this weekend with progressive capitalism is not an oxymoron and some people say it can't work. and part of the point of my book is we can make a market economy. is not a market fundamentalism there is a big role for government that we can make that work as other countries have succeeded in doing. >> and that's a theme running through the book that you want more government intervention and you say regardless of where we are at right now the

4:22 am

way that we look at it and involve government if there is the cooperation 21st century required and then to come away from the government and you say this will be of a new democratic party. >> how much of a change that is how radical is this? this is radical to where we have been in the sense that there has been a cautiousness that i saw when i was in the clinton administration at the beginning of the 2008 crisis

4:23 am

rahm emanuel said don't let a good crisis go to waste and there is a general consensus we did let a crisis go to waste and you ask why obama's heart was in the right place but he was too conservative he actually just said i'm too conservative to do that. he was very wedded to the notions of gradualism and to tweak the system better education here more financial market regulation there. so now we realize they are not enough. so in the economy there was an

4:24 am

enormous increase of market power and to deal with the internet provider you don't have much choice. and when you sign a contrac contract, including a nursing home or whatever you have to give away your right to use the courts. you may not use - - know this but if there is a dispute it will be settled by arbitration. they will be effectively appointed by the business. and the supreme court keeps supporting the fact i didn't not know that that they say too bad you signed away your rights to adjudication by the

4:25 am

public courts. one of the important parts of the democracy is the adjudication. so one of the big changes i talked about curbing the excesses of market power. . . . .

4:26 am

you've taken away our property rights and the american company can't so we have encouraged firms to move abroad almost because when an american firm moves abroad. >> the globalization of discontent is largely about this

4:27 am

although now you are also warning about the de- globalization. the point i tried to make is when we globalize we put a lot of stress in our economy and unlike the scandinavian countries we didn't help people facing the de- industrializati industrialization. we didn't have the job assistance they should have had not only for workers losing their jobs from globalization also change him so we didn't have labor market policies that enable peoplenabled people facie challenges to respond.

4:28 am

the life expectancy is going down dramatically with the industrial-based policy at the same event because the de- globalization is going to mean we will lose our competitiveness in many areas of manufacturing. he says the argument for doing it this protectionism, but it's interesting that the companies are against what trump is doing and let me tell you they are not doing it because they are concerned about the workers first and foremost, they are concerned that their ability to sell cars and they know they can't get them from mexico or

4:29 am

china. they would lose their competitiveness. i run into these terms from the 1970s if i'm reading this right for at&t to settle debate so in the media. even if we do break up facebook and force a spinoff, that might not be enough and then there is an alternative to declaring

4:30 am

facebook a public utility with public oversight. would that be in international thing? >> there are issues about going across borders but what i was trying to highlight in this particular set of paragraphs in the book is the fact that the problems today of the monopolization and market power is no worse at the turn of the 20th century when we had standard oil and sugar and other industries because we knew the deal with standard oil and they were forced to compete against each other we created a

4:31 am

competitive marketplace. with social media, the problem is the whole structure comes from the networks so the risk if they would still be large and dominant and have market power. it's not just ordinary market cover but they have the market power to invade privacy. one of the big concerns with ai and big data, the data creates what you might call a natural monopoly the more data you have, the more economic power you have and the more ability to do things like price discrimination. you could identify how much each person is willing to pay and charge different people different prices. the interesting thing about that is that it undermines the

4:32 am

economy. i don't know how many of you remember this, but the undergraduate colleagues courses the reason it is by paying the same price, you equate the marginal value and marginal cost for everybody and that is a basic condition for efficiency. the.

4:33 am

and that is we do not provide a way to provide access to university education about the accumulation of massive amounts of debt and this has grown to the point it's $1.5 trillion it is a major source of depth in our economy and is having macro economic consequences because people with 25,000, 50,000 if you go to graduate school 100 or $200,000.

4:34 am

you have to ask with respect to this question and others you are asking about how do all these other countries figure out how to solve this problem. they are not as rich as the united states and yet they figure out ways of doing it. another way of putting this question is at the end of world war ii when we had a debt gdp ratio of more than 130% much higher than it was today, what he said was anybody that fought in the war, which was virtually every meal and a lot of women, you could get the most expensive education that you are qualified for for as long as you find it desirable. you could get a college education fo from graduate schol at harvard, columbia, high

4:35 am

ticket price places and we will pay for it. the government will pay for it. if we could afford it, then when our income per capita was a fraction of what it is today, why can't we afford it today? that is the question. the answer is we can't an can aa question of priority is and what we want tdo we want to do with r resources. to come to the specific issues, there's two parts to the question. what do we do with the huge amount of debt the $1.5 trillion of the past, now my preferred way of dealing with it is along the lines of similar to what

4:36 am

australia has done will make it an income contingent loan, convert all these loans and you will pay back depending on how much you ow owe one, two, three% of your income per year and that will depend on your income if it is below 40,000 you don't pay back anything if it is over a million uk 4%, and you pay that until you repay the loan, or for 25 years and after 25 years we say we will have debt forgiveness. you've made your contribution. you've done what you can. we don't want to burden anybody. and that seems to me to be a fair way of ensuring that everybody is doing what they can to pay back their loans.

4:37 am

it's not gettin getting anybodya free ride, but it is saying we can't allow the past to be the kind of person that it's become. another [inaudible] you say given the stinginess of policy you can't mak make the universal basic income work. you are a sign that the policy or a is a visit way too much on? >> my objection to the universal basic income for those who don't know is the grand too everybody just for the right of citizenship and if we have a lot of money to support it. but my real objection is that

4:38 am

one gives them dignity and what we should be doing is saying everybody who wants to work it is able to work, we should say our economy should provide a job and appropriate skills and what worries me is that universal basic income is intended to shift the focus away from the obligation to give work opportunities for everybody. it's very popular in silicon valley because they see ai as creating unemployment and they don't want to see the reality of how we as a society are going to get jobs for everybody if i don't thini don'tthink it's tha. it's going to be decades and decades we are still going to need people to take care of our

4:39 am

people from education and still need people to take care of older people. we are going to be increasing the number of people and the socialist those three that create a lot of jobs. part of the problem is a lot of those shots are not paying decent wages. and why aren't they paying decent wages? because of the history of gender discrimination in america, that those are jobs that have historically been disproportionately occupied. we took advantage of discrimination to keep the wages were. we are going to have to pay more for that. but if we pay more, those jobs would have more respect and we would have more equally in the society.

4:40 am

>> i feel this would be even more expensive -- >> is our market economy works in the way that the aggregate to say, it should be providing jobs for everyone. and that's the way the market demand is supposed = including the demand for the supply we shouldn't be having a massive te amounts of the unemployment at young african-americans that we have today. it works the way that many say it is. there is no pervasive racial and gender discrimination. and in those areas, we are going to have to take a little bit more of an active rol role and t isn't going to cost a massive amount. and actually, i think it's going to make the economy more productive.

4:41 am

now it is just going to be me. so, since they ar we are talkint the big defensive things, but the rundown recreations and what you think about them. that's a harder issue. let me say the notion at the end of the civil war he compensated the owners of slaves but not the slaves as an anathema. we have to recognize that. it's just amazing. it's in britain, france, it was the norm at the time, but looking back on it, we should be really angry and upset.

4:42 am

the objective should be to integrate everybody into our society on equal terms and to do that, we are going to need to spend more money on those who we discriminated against in the past. so, my own view is we should be using you can think of it as the funds we would have otherwise spent as part of our obligation from the past if you want to think of it that way too we ought to be spending more to create a more equal society. >> in a way if i've got this right it's part of your job is guaranteed that well get the higher levels of unemployment among the population that will

4:43 am

effectively mean a bunch of government money going into the population which would serve a similar purpose with a lot of decarbonization how much of the green new deal? >> you've identified two pieces. the central message of the green new deal is we are facing a crisis absolutely. i agree with that. i was on the panel that reviewed climate change back in 95 and the one mistake we made was the repetitiveness with which the

4:44 am

problems would be developing. we saw them coming, but they come more rapidly. we are facing a crisis and the green new deal says there is an urgency and the scal a scale wet faced up to. part of what they are also saying is that we have the capacity to respond to this if we think about this as a new deal or wartime mobilization, but to do that, we really need to make sure that we use all of the society's resources. so what do we do in world war ii, we brought women into the labor force. women that hadn't previously been a part of the labor force because we needed to mobilize all of our resources. most americans probably don't realize that america's labor force participation today is

4:45 am

mediocre among the advanced countries. other countries are doing better than the united states. part of it is the policy we don't provide child care. there are lots of other things other countries have figured out that they can afford and we are richer than they are, so we could afford it. as the minister of norway. particularly we get more.

4:46 am

we have to do and get the resources committee under utilized resources get rid of some of the deficiencies in the power and redirect them to what is a emergency the problem of climate change. >> you talk a lot about inequality in society more equal but you never mention worker

4:47 am

co-ops of the worker co-ops to make the society more equal democratically. >> you knew when you were there the u.s. ran the world bank and i'm not against your working there. i believe in the whole system bubut that shouldn't be dominatd by the u.s.. my question is you are very good in talking basically the u.s. economy or the advanced nations economies, but you are not saying anything about the people in dire poverty.

4:48 am

>> i had some ideas recently. a lot of the issues you bring in your book in a slightly different way i do talk about the co-ops in the book and one of the things i point out is the need for the institutions that we focus on for-profit corporations where there is no representation of workers in europe or germany they have stakeholder capitalism but is it just to maximize the value. then there is a section where we

4:49 am

talk about the role of the co-ops. one of the things i emphasize in that discussion is the way that the market economy works shapes who we are as people come about because we have a market economy that is very shortsighted, that is very materialistic and profit oriented has led us as a society to be dominated by people who. and one of the things i emphasize there are two ways of getting wealthy. one is by enhancing the size and the other is by grabbing a bigger slice of the pie. because we haven't distinguished between the two.

4:50 am

we almost attended it doesn't matter how you get your wealth as long as you are wealthy. and unfortunately, what that has done is give a lot of latitude to the moral turpitude saying what matters is just getting wealthy. and you sedid you see that in tp university trying to take advantage of others and use it for profit university is univerd to take advantage of people who are less informed about what the education is about. so it is interesting the one part of our financial system that worked well in the run-up

4:51 am

to the crisis was our co-ops and they are basically cooperatives. they do not engage coming into the kind of exploitation in the for-profit banks and after the crisis, they maintained their lending to small businesses. so, both before and after the crisis, they were exemplary. exemplary the idea thaexemplary. part of the idea that i talked about is they not only behave better economically, but they also changed the nature of who we are. they do encourage more cooperative behavior and that will change the nature of our society. on the issue of the world bank and particular role of the u.s., there's two parts to the question, it is curious that the

4:52 am

u.s. was part of a cheap 20 meeting where there was an agreement that the next president of the world bank and the imf would be chosen and this is a radical idea on the basis of merit. so there wasn't an agreement about this radical idea but then came the time to implement it. the person he appointed turned out not to be good they haven't done what they've chosen to say. it's a multilateral institution and should be chosen on the basis of merit. the other issue i've talked

4:53 am

about previously is poverty around the world is obviously a very big issue. it's not only poverty at the bottom but it's also inequality at the top. one of the statistics i mention comes from a study done every year at volvo' -- dot 26 people from around the world have as much wealth as the bottom 3.9 billion people. the bottom half of the world. so, in that testimony to how much concentration there is but also how much poverty there is at the bottom. now, where this fits into the current american politics is the

4:54 am

following. trump has said that our trade agreements are unfair to american workers and basically he's tried to get across the idea that our trade negotiators were those by the developing country. any of you that have watched the trade negotiations over years will find that laughable and when i talked to the trade ministers from south africa or other countries, they actually do laugh. they say the trade agreements were dictated by the united states largely into the problem wasn't that the u.s. was by south africa or some other developing country. the problem was with the united states wanted. and the american trade agenda was a corporate trade agendas

4:55 am

with advancing the corporations at the expense of american workers. that is just one example. and the way that those were structured brings things kept american agricultural subsidies like subsidies for cotton, the effect of which was billions of dollars go to very small numbered about 25,000 american cotton farmers, just one example leading to the end poverty of millions of cotton farmers in africa and india and other developing countries. >> i will just jump in here to mention what just came out yesterday saying that climate change has basically made them richer and if you really want to

4:56 am

help, you've got to start making an effect on climate change. but we need some questions from women since we haven't had any. >> because of the troops etc. we are now having a military budget that is bigger than other countries combined including russia and china so my question to you is what are we going to do about the military industrial complex and how does it impact your agenda?

4:57 am

>> i used the $3 trillion because the number was more like five or 6 trillion but that sounded too large so i wante wad the conservative side of that. one of the things i pointed out is we were spending massive amounts of money on the weapons that didn't work against enemies that didn't exist in the basic fact is the cold war is over. we have threats, terrorism is a serious threat, but the kind of expenditures that you need against that are very different from a kind of expenditures that you need during the cold war. and so, what we should have done is restructure our expenditures, rethink what are the current threats, and i believe that if we have don had done that, we ce

4:58 am

had more security at a fraction of the expenditures that we have. i need to mention the en as the actual numbers came in, it approved they were really conservative, just to give you one number you mentioned. we estimated somewhat less than 40% of people coming back from iraq and afghanistan would be disabled. and many of them with multiple disabilities. the number is much higher than that. and the cost has been much higher suggests the disability caused and expectation today is well over a trillion dollars from that war.

4:59 am

that shows you what a big mistake that was. >> we have time for a couple more questions. my question concerns the corporations. how do we ensure they pay their fair share of taxes at the likes of amazon doesn't get away with paying $0 in taxes and my second question is how we break up monopolies and what are the solutions to the problems? should amazon the presiden be p? >> i think there are several

5:00 am

parts. first, we need to recognize companies like apple and google are not paying their fair share. they've used the same cleverness that they have making products to avoid taxes and probably invested just as much money. in the case of apple and ireland, it turned out that they were paying i think 25 or 1% or less than .51% in taxes and the race between them who could pay the least. so, the evidence of the tax avoidance is very strong, and globalization has the opportunities.

5:01 am

there are a couple of ideas that have been floated about how to deal with it. one of them is a global minimum tax to say if you operate in the united states, we will look at your consolidated profits and you will have to pay somewhere at least 15 to 20% of those global profits. and what we have been having come and amazon was a canned example of this, the race to the bottom, everybody tried to do special deals in the way that amazon tried to deal that had wd have been a global phenomenon and they were dealing with ireland and many others luxembourg, starbucks. it wasn't paying any taxes in the uk and kept expanding. usually businesses that don't make any profits to expand.

5:02 am

what's the trick, obviously what they were doing is charging franchise fees to ireland of all of their profits. so all the profits were being siphoned off to ireland where they got a good tax deal. so if you have a global minimum tax, they couldn't get away with it and they would have to pay back in the united states or europe. the global minimum tax without getting out of residence. there is a discussion going on now is that frameworks for agreement about the taxation of the multinational corporation and making sure that they can shift their income and the base of the profit shifting which is

5:03 am

succeeded in stopping some of the most egregious that with apple and google and starbucks so there is a global consensus of dealing with this problem called profit. what do you do with the monopolies, first wit christophr deemphasize it's not just breaking up monopolies, but circumscribing some of the worst behavior. in the united states, if you've acquired monopoly power legitimately, then you can do anything you want. so, if i'm a drug company and i

5:04 am

buy the rights to produce a certain drug, once i have acquired legitimately, i can charge any price i want. and this is not just a hypothetical. a number of companies have done that. and increased the prices. a drug that cost pennies don't charge a thousand dollars for it. they have a monopoly. in europe, there is a doctrine called abusive market power. they look at what goes on to see who can you let this happen. i think that it is unconscionable. the other example, the united states focuses only on what are called vertical mergers between firms and the industry. but when a cable provider buys

5:05 am

an entertainment company, it can use control over the table or the internet to distort the market. we were aware that we had what was called net neutrality, so you can't do that. under chao but it has been abolished and at the same time the courts have said don't worry about this. this is a vertical. there's no danger of monopoly power. what world do they live in a? so those are the kind of things that economists have recognized the danger that the courts have not. there are issues of presumptions and words. the danger going back years as

5:06 am

the courts have taken the view pushed by university of chicago economists that the markets are naturally competitive. so, don't worry about the market power because competition can't be suppressed. again you wonder what world they live in. it is suppressed all the time and the companies have gotten more and more clever at figuring out how to create barriers to entry and express competition. so, as one person said in a recent hearing i was out, we have to spenhadto spend all of y proving that water is wet and after we prove that, we don't have any resources to prove anything else. >> something that you mentioned the cable providers in particular because the trump

5:07 am

administration took at&t to court and said you're not allowed by time warner. we don't want what you do this and they lost a. this is the court system about what kind of legislation is necessary to prevent these kind of things. we have to change the presumptions of the courts and say | jurors are a problem. facebook is very aware of how our antitrust law works so it buys companies where.

5:08 am

it looks at the future potential threat to the market dominance and place them today. the standard procedure says it's just a little company how can you object to facebook by an event, you look at how much you pay in to see they were not buying it because of the technology. their engineers could have re-created the technology. they were buying the competiti competition. everybody knew that accept our antitrust authorities. so, the basic idea is you have to have a forward-looking antitrust law and ask them up where competition is today but

5:09 am

let's not suppress the potential competitiosuppressed thepotentie future. >> one more question right behind us. >> national health insurance or medicare for all, do we all get to go to the very best doctors and hospitals? like we can inundate them for special surgery is it doesn't even take v-victor patients were very many now. as an economist, how do you deal with the? >> let me put this in perspective. the basic point is to realize that our healthcare system is extraordinarily inefficient. we pay roughly 18% of gdp, high gdp per capita. canada, france spend about 11% of gdp.

5:10 am

weekend worse outcomes than france or canada. why? there's a lot of inefficiencies and that is related to market power, the market power of insurance companies, health insurance companies and pharmaceutical industries. there are other reasons but thee market power that hospital conglomerates so there are a lot of market hours that all of us pay. there are many i think we should begin with the premise that access to health should be a basic human right. they have recognized this and it was interesting president sarkozy of france was in the

5:11 am

united states at the time of the obama care being discussed and was being asked a question about obamacare in his review of it and he began by saying i don't want to interfere in the domestic politics. but he couldn't help himself and he said that i just don't understand you americans because you all think that access to health care should be a basic human right. and some way you should figure that out. a particular proposal particulat in the book as part of a number of proposals not just my proposal, it was originally part of obamacare, and what it says is that the government should provide the options for people

5:12 am

to buy extended medicare going down, but not a compulsion. you keep the right to buy private insurance. but it isn't providing an adequate product. it's down to one or zero health-insurance companies at least people have a choice with medicare providing that kind of competition and that kind of choice would improve the efficiency of the private sector because it works for them to compete. so, the irony is of course private health-insurance companies we don't want any competition. we know what happened when we try to providtried to provide hh

5:13 am

insurance that was essentially the same as medicare that cost us 20% more because of our administrative costs. so, we are less efficient and can't compete with the government in the area now, the fact is that resources are limited and we have to have some way of making sure that resources are allocated efficiently. the private sector rations healthcare. every time you want a test, you have to get an approval and convince the insurance company that it's needed. we still have to have some procedures like that. it's not going to be everybody

5:14 am

who wants to have a surgery can get a knee replacement, but the idea that people will voluntarily get triple bypass surgeries is a little bit ridiculous. you don't go get a triple bypass unless you need it. so the utilization of things like heart surgery are exaggerated. >> if you have the public option that basically anyone who wants to buy medicare can get the care and if yo you're a knee surgeon than that of supplements but at least you have something. >> exactly. and the if i go to some doctors,

5:15 am

they will pay for everything except a copayment, but there are other doctors that are out of network in which i am today .-full-stop and we will wind up with a system similar to that. the fact is that not everybody can get a surgery from the same surgeon. he just doesn't have enough times that there is some way we have these allocated resources. >> that's basically it. we have to wrap up, but thank you all for coming. [applause] we are going to hang out and signed this book. >> thank you for coming. we ask that you remain in your seats for a moment.

5:16 am

we don't want you to wait in line for hours and hours, so we are going to call you a row by row for the signings of remain seated for the time being and we will get right back to you after we rearrange the stage. thank you so much. [applause]

5:17 am

5:18 am

good afternoon. good afternoon and welcome to the american enterprise institute. i am a resident scholar and financial service organizer of today's